K+S Aktiengesellschaft. Analysts Conference. on 15 November in Frankfurt. Speech by Dr. Ralf Bethke,

Transcription

1 K+S Aktiengesellschaft Analysts Conference on 15 November 24 in Frankfurt Speech by Dr. Ralf Bethke, Chairman of the Board of Executive Directors The spoken word applies

2 - 2 - K+S Group A Warm Welcome! Analysts Conference K+S Aktiengesellschaft 15 November 24 Frankfurt Experience growth. Ladies and Gentlemen, We are pleased to be able to greet so many of you at our analyst conference once again and bid you a warm welcome. Firstly, I will report on current business developments and on our expectations regarding individual areas of business. Afterwards, Mr Steiner will discuss the financial key points of our interim report for Q3 24. In conclusion, I shall present the K+S Group s expectations for the whole of 24 and our future targets. After this, we shall be pleased to answer your questions.

3 - 3 - K+S Group Path of Growth Consistently Continued Leading position as provider of speciality and standard fertilizers, plant care and salt products strengthened Core business areas expanded through acquisitions (esco, potash, COMPO) Structural and process improvements launched early and partly completed Basis for further growth created 15 November.24 K+S Group 1 Ladies and Gentlemen, The K+S Group has continued steadily along its path of growth in 24. We have consolidated our leading market position as a supplier of speciality and standard fertilizers, plant protection agents and salt products. The overall favourable market development has led to increased demand and clear price increases, especially in the potash fertilizers business. Thanks to this, we have been able to boost our value added to a tangible degree. Furthermore, we generate about three quarters of our revenues in Europe, where we can exploit various logistical advantages vis-à-vis our competitors. With our acquisitions in 24, we have expanded our core business areas and made our portfolio even more robust. An important milestone was the total acquisition of esco, as a result of which we have decisively consolidated our lead on the European salt market.

4 - 4 - In the Potash and Magnesium Products business segment, we have expanded our market position in France, Europe s leading agricultural market, by acquiring the fertilizer business of the French SCPA (Société Commerciale des Potasses et de l`azote). Thanks to the acquisition of Meiners AG at the beginning of the year, COMPO has secured its supply base for the potting soil business over the long term, and can further expand its European market lead in this segment. Internally, we have initiated a series of early improvements to structures and processes and have already completed some of them, so that we can reduce our production costs and administrative expenses and remain competitive on an international scale. In the potash business they include in particular the development of the rich sylvinite deposits on the Werra, an increased flexibility of working hours accompanied by an increased share in profits by our employees, and our 1-point programme. In the COMPO and Salt business segments, too, we have implemented measures to optimise processes and reduce costs. K+S Group Key Data as of 3 September 24 million Change 1% esco 62% esco Revenues 1, , % Earnings before interest and taxes (EBIT) % Earnings before income taxes % Earnings after taxes % 15 November.24 K+S Group 2

5 - 5 - Ladies and Gentlemen, During the first nine months of this year, the K+S Group s revenues have risen by some 2 million or 12 % year-on-year, reaching 1.9 billion. Pleasing growth figures have been posted by all core business areas. About half of the increase in revenues is attributable to the total acquisition of esco. At million, we have already exceeded previous year s total EBIT by 35.5 million or 37 % during the first nine months of this year. The Potash and Magnesium Products business segment is the main contributor to this clear improvement. Apart from the very good business, the results of our continuous improvements to efficiency and cost reductions had an impact on this result. With the exception of the COMPO business segment, which is still burdened by high ammonia costs, which we still cannot fully pass onto the market, all business segments posted an aboveaverage increase in earnings. Earnings before income taxes rose by 35.6 million or 38 % to million. Despite high taxation, earnings after taxes reached million, which is clearly above the previous year s figure. And now let us proceed to the individual business segments:

6 - 6 - Potash and Magnesium Products Development of World Potash Demand million tonnes K 2 O Significant increase in demand in recent years Potash becomes scarce 2.9 High price increases Medium-term demand trend: approx. 2% growth per year sources: IFA, K+S 24 (e) 15 November.24 K+S Group 3 World demand for potash has increased by an above-average amount over the past few years. Following an increase of some 7% in 23 to 28.5 million tonnes, this year we expect a good 5% increase to about 3 million tonnes of K 2 O. This is almost 5 million tonnes of K 2 O more than in 21, and, for the first time, the level attained in 1988 the year before the rapid change of the COMECON will again be achieved. Despite rising production, there is a worldwide shortage of potash at present. Prices have reached an all-time high, due mainly to the continuing high costs of sea freight and the increased energy costs. In addition, the strong demand for potash has resulted in very low inventory levels at all manufacturers. We continue to expect an average increase in demand of some 2% p.a. in the medium term.

7 - 7 - Potash and Magnesium Products Business Development as of 3 September 24 million % % 45.3 Increase in quantities of speciality and standard fertilizers High price increases Efficiency enhancements (incl. 4 hour week as of 1 Sept. 4) Outlook for the whole of 24: Earnings again well over previous year Revenues EBIT Overproportional rise in EBIT 15 November.24 K+S Group 4 On account of the rapid development of demand on the world market, the revenues of our Potash and Magnesium Products business segment have risen by 4% yearon-year, reaching 82 million. This can also be attributed to increased volumes of speciality and standard fertilizers and clear price increases. EBIT reached 45.3 million and, after the first nine months of the year, exceeded the previous year s level by 7%. The results of our comprehensive increases in efficiency were a major contributing factor in this regard. The consistent implementation of our 1-point programme and the introduction of the 4-hour working week as of 1 September 24 are factors that have already improved our earnings strength this year, but will impact in full next year. For the whole of 24, we again expect revenues to be well above the previous year s good level. On account of the positive development of operating business and the results of our efficiency increases, EBIT will be seen to have risen even more compared with the previous year.

8 - 8 - Potash and Magnesium Products Launch of Sylvinite Project Additional offer of 25, t p.a. as of 1 January 25 Process optimization and cost reduction Improvement in results by some 2 million p.a. Consolidation of international competitiveness of potash business 15 November.24 K+S Group 5 The development of the rich potash deposits on the Werra, the so-called Sylvinite project, was launched at the beginning of October as planned. Thus, as of 1 January 25, we will have an additional 25, tonnes per year of potash products at our disposal; in view of the current high demand, the timing is perfect. Furthermore, underground processing of rich crude salt deposits is offering sustainable opportunities for process optimisation and further cost reduction. The manufacturing plants of the combined Werra plant can be used to optimum capacity and the structural advantages of the deposits can be used economically. Thanks to the implementation of the project, we expect an annual improvement in earnings by some 2 million as of 25, and therefore a sustainable improvement to our international competitiveness in the potash business.

9 - 9 - Potash and Magnesium Products Acquisition of SCPA Activities Pré on Pail Reims Le Teil Ste Radegonde Wittenheim Mulhouse Acquired activities: 4 production sites for speciality and complex fertilizers, including regional potash distribution 1 potash granulation plant SCPA holding (including trademarkt rights and customer bases) 15 November.24 Enhancement of market position in France as Europe s most important agricultural market Pooling of know-how in distribution and marketing Best conditions for efficient supply of the French potash market Continuation of growth strategy K+S Group 6 Ladies and Gentlemen, In October this year, we expanded our potash and magnesium business in France through the acquisition of the distribution and production capacities of SCPA. The acquisition comprises the trademark rights and customer bases of SCPA, as well as its shares in regional fertilizer companies engaged in the manufacture of PK and NPK fertilizers as well as speciality products for agriculture. In addition, K+S is taking over the potash granulation business of Compagnie de Compactage de Wittenheim (CCW) with a capacity of some 4, tonnes per year. This also includes the acquisition of potash distribution of regional companies and the holding company in Mulhouse. The acquisition of the SCPA business provides us with the best conditions for an expansion of our business relations in France and for the long-term deliveries of our potash and magnesium products to our French customers. In addition, we can pool

10 - 1 - our know-how in distribution and marketing even closer and exploit further synergies for the remaining K+S companies in France. With this acquisition, we are consolidating our position on Europe s most important agricultural market and, at the same time, steadily continuing our growth strategy. COMPO Business Development as of 3 September 24 million % % 21. Good demand for ENTEC and speciality mineral fertilizers Price increases in professional business Consumer business down (weather, reduced buying) 2 1 Revenues 14 7 EBIT Process improvements introduced Outlook for the whole of 24: Slight rise in revenues EBIT below previous year (ammonia) 15 November.24 K+S Group 7 Developments on COMPO markets have been very varied so far this year, in both the consumer and the professional segment. Consumer business has been particularly hit by inclement weather in the spring and summer and by overall reduced spending by consumers, especially in Germany. On the other hand, in the professional segment, the good level of demand continued, especially for ENTEC and speciality mineral fertilizers; here we have been able to pass on essential price increases which, however, could not level out the high increases in the costs of raw materials.

11 At 424 million, revenues as at 3 September exceeded the previous year s level by 7%. However, at 21 million, EBIT was 6.2 million below the previous year s figure. Apart from reduced consumer business, this was attributable particularly to the exceptionally high world price of ammonia, about 25% higher than the average price in 23. To offset this, apart from price increases, we have applied a series of new measures to improve processes ands reduce costs. We expect to see the first results this year, but most of the economising measures will not be effective until next year. Thanks to good business developments in the professional segment, we expect a slight increase in revenues in 24. EBIT will be clearly below the previous year s figure on account of increased ammonia costs. fertiva Business Development as of 3 September 24 million % % 6.9 Current cost-induced high prices of nitrogenous fertilizers (ammonia) Stronger focus on European markets as a result of earnings Long-term partnership with BASF established 1 2 Outlook for the whole of 24: Increase in revenues Revenues EBIT EBIT higher than last year (new attractive earnings rules at BASF) 15 November.24 K+S Group 8

12 So far this year, the fertiva business has been marked by brisk overall demand for nitrogen fertilizers. Thanks to the good demand, as well as the high price of ammonia, the international price level of nitrogen fertilizers is at a high level at present. Until the end of this year, we expect no change to this trend. On account of the continuing high overseas freight costs, we have increased our focus on European markets. In addition, on account of the generally high level of prices of nitrogen fertilizers and speculative demand, the normally tangible pressure of competition from East European and Russian commodities can hardly be felt right now. At 37 million, fertiva revenues for the first nine months of this year have exceeded the previous year s figure by 11% mainly as a result of price factors. EBIT has risen year-on-year by 1.2 million to 6.9 million. This is attributable chiefly to the new agreement between K+S and BASF, which, as of the start of this year, envisages a further incentive in excess of the hitherto earnings limit. With the conclusion of a partnership agreement in June 24, K+S and BASF confirmed their intention of continuing the long-term strategic partnership with fertilizers beyond 214. On account of the generally high price level, we expect an increase in revenues for the whole of 24 similar to the first nine months of the year. EBIT, too, will turn out to be higher due to the new arrangement.

13 Salt Business Development as of 3 Sept. 24 (1%) million % +13% Complete incorporation of esco Volume increases in all product segments, particularly good business with de-icing salts (start of year,early orders) Outlook for the whole of 24: Revenues and EBIT clearly higher than last year as a result of consolidation * 62% 15 November.24 * * Revenues EBIT K+S Group 9 Ladies and Gentlemen, Following its complete takeover, our salt subsidiary esco is being fully included in the consolidated financial statements of K+S with retroactive effect to 1 January 24. Last year s figures were based on our 62% share in esco, therefore the figures are not comparable. As at September, mainly as a result of consolidation, revenues rose by 17 million or 7% to about 26 million. Increased volumes in all product segments, especially the very good business with de-icing salts at the beginning of the year and the seasonal purchase business had an positive effect. At 4.9 million, EBIT also clearly exceeded the previous year s level. For the whole of 24, we expect both revenues and EBIT to be markedly higher than last year.

14 Waste Management and Recycling Business Development as of 3 September 24 million % % 6.8 Special projects involving the clean-up of pre-existing environmental contamination Underground re-utilisation satisfactory Outlook for the whole of 24: Improvement in earnings and tangible rise in EBIT Revenues EBIT 15 November.24 K+S Group 1 The difficult market situation in the waste management business remains unchanged: Excess capacities and reduced waste quantities as a result of economic developments are keeping prices at a low level. Even so, the Waste Management and Recycling business segment achieved a pleasing increase in revenues of 1% to about 45 million this year, mainly thanks to two special projects involving the clean-up of pre-existing environmental contamination and an overall satisfactory business with underground waste re-utilisation. As a result of this development, EBIT rose to 6.8 million over the first nine months of this year. Despite the continuing pressure of competition, we expect an improvement in revenues and a noticeable rise in EBIT in 24 as well.

15 Services and Trading Business Development as of 3 September 24 million 5 25 Higher quantity requirements CATSAN granulation % +21% Reduced handling for third parties (grain) Nominal fall in revenues in IT services for esco (complete consolidation) 1 5 Outlook for the whole of 24: Revenues below last year Revenues EBIT Higher EBIT (internal Group services) 15 November.24 K+S Group 11 In the Services and Trading business segment, third-party business as of 3 September 24 fell by 14% to 38 million. Higher quantity demands in CATSAN granulation faced reduced third-party loading, especially in grain handling, on the part of KTG in Hamburg. Furthermore, the total consolidation of esco has led to a nominal fall in revenues for IT services by about 3 million; in the previous year, the services attributable to the 38% Solvay stake were still included in third-party business. Despite the reduced revenues, EBIT rose by 21% to 18.9 million over the first nine months of the year. This was due to a higher earnings contribution from additional logistics services for the Potash and Magnesium Products business segment. For the whole of 24, we expect third-party business to be down on last year. However, EBIT should be higher because of the additional services for Group companies.

16 K+S Group Expectations for the Whole of 24 Increase in revenues to over 2.5 billion Business operations with positive sales volumes and price trends Complete takeover of esco Clear rise in EBIT Process improvements and efficiency enhancements Conclusion of sylvinite project Net income clearly higher than last year despite higher taxation 15 November.24 K+S Group 12 Ladies and Gentlemen, When we announced our half-year figures in August, we already markedly raised our expectations for the whole of 24. Now, on the basis of the overall positive volume and price trends in the operating business, we assume that revenues will rise to over 2.5 billion. We will particularly profit from the continuing high demand for potash. Furthermore, the complete takeover of esco provides a significant increase in revenues. The growth in EBIT will reflect our market success on the one hand while on the other hand, costs are influenced to a greater extent by the process improvements and increased efficiency, especially the adoption of the 1-point programme, the first effects of the introduction of the 4-hour week, and the Sylvinite project. With respect to net income, too, we expect a clear year-on-year increase despite a higher tax burden. Thanks to this favourable development, there is a real chance that

17 the Board of Executive Directors and the Supervisory Board will propose to the Annual General Meeting a meaningful increase in dividend for the year 24. We are also very confident about 25, provided that the global economic conditions will not deteriorate markedly next year. We base our outlook on a continuing strong demand for potash fertilizers and varied cost reductions as a result of our efficiencyboosting measures. The additional production capacity caused by our new rich deposits being fully available in 25, should also consolidate the K+S Group s earnings strength. K+S Aktiengesellschaft K+S Share Price Compared with DAX and MDAX Index: 3 December 23 = K+S +55% MDAX +17% +4% 9 DAX 8 Jan. Apr. July Oct. source: Bloomberg; as of 11 November November.24 K+S Group 13 Our operating business success and the favourable forecasts, especially for potash fertilizer business, have also been reflected in the good performance of the K+S share. Our share has gone up by over 5% since the beginning of the year.

18 K+S Group Ambitious Targets Expansion of our leading market positions through Innovations Acquisitions / Cooperations Consolidation of international competitiveness Structural and process improvements in all business fields 15 November.24 K+S Group 14 Ladies and Gentlemen, Finally, allow me to present a few conclusions. The K+S Group is continuing along its path of growth. We have set ourselves ambitious goals for the future, too: We shall further expand our leading market positions by means of innovation and by means of additional acquisitions and cooperations. We will also expand our portfolio in a targeted way, taking into account our special competencies and thereby further synergies for the K+S Group. We are consistently endeavouring to boost our international competitiveness. To this end, we are making various lesser and bigger improvements to structures and processes in all business segments. We are on the right path and see a variety of new opportunities for healthy growth and sustainable good earnings in the future. Thank you very much.